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THE MINISTRY OF FINANCE

THE MINISTRY OF FINANCE

CIRCULAR No.26/2000/TT-BTC OF MARCH 31, 2000 GUIDING THE IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX TO ACTIVITIES OF PUBLISHING, PRINTING AND DISTRIBUTING PUBLICATIONS

Pursuant to Law No.02/1997/QH on Value Added Tax of May 10, 1997;

Pursuant to the Government�s Decree No.28/1998/ND-CP of May 11, 1998 detailing the implementation of the Value Added Tax Law and the Government�s Decree No.102/1998/ND-CP of December 12, 1998 amending and supplementing a number of articles of Decree No.28/1998/ND-CP;

Pursuant to the provisions of the Publication Law and the documents guiding the implementation thereof; the Culture and Information Minister�s Decisions No.2607/VHTT-QDXB1 of August 26, 1997 promulgating the "Regulation on organization and conducting of printing activities"; No.2051/QD-CXB of August 15, 1997 promulgating the "Regulation on organization and conducting of publications distributing activities"; and No.75/1999/QD/BVHTT of November 8, 1999 promulgating the Regulation on joint ventures for publications printing and distribution.

In order to make the implementation of the VAT Law suitable to the production and business activities of the publications publishing, printing and distribution branch, the Ministry of Finance hereby guides the implementation of the VAT Law to activities in the publication publishing, printing and distribution branch, as follows:

I. VAT APPLICATION SCOPE

1. Activities subject to VAT:

Subject to VAT are activities of publishing, printing, exporting, importing and distributing publications of various kinds, including:

- Books; documents; paintings; photos; calendars; maps; atlas; musical compositions; parallel sentences, scrolls and posters, catalogues, leaflets, advertising folders.

- Books published on other materials or audio tapes and disks, visual tapes and disks enclosed to the books.

- Other kinds of publications.

2. Activities not subject to VAT:

Not subject to VAT are activities of publishing, printing, exporting, importing and distributing publications of various kinds, including:

- Printed newspapers (including activities of transmitting news pages), magazines, journals, specialized bulletins.

- Political books being those propagating the political and ideological lines of the Party and the State in service of the political tasks, according to special subjects or themes, in service of anniversaries, traditional days of organizations, levels, branches and localities; books reviewing the "good people, good deeds" movement, books containing classic works of Party and State leaders.

- Text books being those for teaching and studying activities at all educational grades from pre-school classes to secondary education classes.

- Teaching materials being books for lecturing and studying activities at the universities, colleges, vocational intermediate schools and job-training schools.

- Legal document books being collections of legal documents, such as: directives, circulars, decrees, ordinances, laws and the Party�s resolutions and documents.

- Books printed in languages of ethnic minority groups in Vietnam, which are those in service of raising the intellectual standards of ethnic minority people, including: books printed in ethnic minority languages and bilingual books printed in both Vietnamese language and an ethnic minority language.

- Paintings, photos, leaflets and folders of all kinds for propaganda and campaigning purposes; mottoes, pictures of top leaders, the Vietnam Communist Party�s flag, the Ho Chi Minh Communist Youth Union�s flag, the Ho Chi Minh Pioneers� Organization�s flag and the national flag.

- Audio and visual tapes and disks to be used as substitutes for books or attached to books of those kinds not subject to VAT.

3. VAT payers:

Liable to pay VAT are organizations and individuals engaged in activities of publishing, printing, exporting, importing and distributing publications subject to VAT specified at Point 1, Section I of this Circular.

II. TAX CALCULATION METHOD

Payable VAT shall be calculated according to the deduction method

Payable VAT = Output VAT - deductible input VAT.

A. REGARDING OUTPUT VAT:

Output VAT shall be determined on the basis of VAT calculation prices multiplied by (x) VAT rates:

- VAT calculation prices are those having not yet included VAT.

- VAT rates are prescribed in the current guiding documents and shall be uniformly applied in all processes of publishing, printing and distribution. More concretely:

a/ The 5% tax rate shall be applicable to books of all kinds (including tapes and disks attached to those books), except for books not subject to VAT as specified at Point 2, Section I of this Circular.

b/ The 10% tax rate shall be applicable to all other publications other than those not subject to VAT as specified at Point 2, Section I, and taxable publications specified in Paragraph a, Part A, Section II of this Circular.

Basing itself on the peculiarities of each activity, the Ministry of Finance guides the VAT declaration and calculation as follows:

1. Regarding the publishing activities:

Publishing activities are the process of publishing printed matters conducted from the stage of reading manuscripts to the stage of distributing publications to consumers.

a/ For publishing houses that conduct publishing activities by themselves:

- The output VAT shall be determined on the basis of VAT calculation prices (x) tax rates. The publications� cover prices are those having included VAT. Upon calculating VAT on publications, such prices shall have to be converted into VAT calculation prices according to the following formula:

VAT Cover price (or payment price)

calculation = �������������

price 1 + tax rate

- In cases where a publishing house distributes its publications through a distributing organization, VAT calculation prices of such publications shall be determined according to the following formula:

VAT Cover price - distribution fee

calculation = ������������

price 1 + tax rate

- In cases where a publishing house sells its publications directly to consumers, VAT calculation price of publishing activities shall be determined according to the following formula:

VAT Cover price (or payment price)

calculation = �������������

price 1 + tax rate

- For its publications consigned for sale, a publishing house shall use the form of ex-warehouse bills of goods consigned to agents for sale (Form No.04/XKDL-8LL issued together with the Finance Ministry�s Circular No.140/1999/TT-BTC of December 2, 1999). Such ex-warehouse bills shall be used to monitor the publication sale consignment. When a publication is paid for, the publishing house shall issue an added value invoice clearly inscribing that such invoice is made together with ex-warehouse bill No., date...; then the publishing house can base itself on such form to add some appropriate criteria conformable to the managerial requirements and register them with the tax agency.

- For case of barter which is considered a sale-purchase mode, invoices are also required.

b/ For publishing houses that enter into publishing joint ventures:

Publishing houses that enter into publishing joint venture with domestic organizations and/or individuals shall have to comply with the provisions of the Publication Law and the guiding documents. For all forms of publishing joint venture, the involved publishing houses shall have to pay VAT according to the following stipulations:

b1/ For publishing houses that enter into publishing joint venture with business organizations and/or individuals:

- Publishing houses that perform services in the publishing process such as editing and finalizing manuscripts, organizing the printing-plate making, carrying out the procedures for registering publishing plans... for which they collect managerial fees, shall declare and calculate VAT on the collected managerial fee amounts. Such turnover shall be considered having not included VAT.

For example: Publishing House A signs a contract on publishing joint venture with organization B to publish a literary book with a quantity of 10,000 copies and a cover price of 6,300 dong/copy, 7% of which is collected as managerial fee by Publishing House A. Assuming that such managerial fee has not included VAT, when the publication is distributed, the publishing house shall issue added value invoice for the turnover of managerial fee as follows:

Managerial fee: 10,000 copies x 6,300 dong/copy x 7% = 4,410,000 dong

Output VAT = 4,410,000 dong x 10% = 441,000 dong.

- In cases where all publications are distributed by its partner, the publishing house shall, besides declaring and calculating VAT on the managerial fee, have to declare and calculate output VAT on the whole publication quantity. The partner shall have to pay VAT on the publishing house�s behalf. Meanwhile, the publishing house shall have to separately monitor the sale turnover of the quantity of joint-venture publications and must not account it into its own turnover. The VAT calculation price shall be determined according to the following formula:

VAT Cover price - distribution fee

calculation = ������������

price 1 + tax rate

In which: The cover price minus the distribution fee must not be lower than the cost price of the standardized page.

After the publishing house�s director signs and approves the distribution of publications, the publishing house shall have to issue added value invoices to its partner to serve as basis for accounting deductible input VAT, for partners being units that pay VAT by the deduction method, or accounting costs, for units that pay VAT by the direct method. Vouchers of expenses for publishing activities shall be declared by the publishing house or its partner that directly pay the expenses for calculation of input VAT for each party.

For example:

In May 1999, Publishing House A signed a joint publishing contract with Organization B to publish a literary book with a quantity of 10,000 copies:

Price printed on the cover: 6,000 dong/copy

Distribution fee (30%): 6,000 dong x 30% = 1,800 dong/copy

When Publishing House A delivers books to Organization B, VAT shall be calculated as follows:

VAT 6,000 - 1,800

calculation = ������ = 4,000 dong/copy

price 1 + 5%

Output VAT: 4,000 x 5% = 200 dong/copy

Publishing House A shall issue added value invoices to Organization B for 10,000 copies, inscribing a VAT amount of 2,000,000 dong.

In cases where Organization B is a unit that pays VAT by the deduction method, it shall account a deductible input VAT amount of 2,000,000 dong. By June, Organization B shall distribute 2,000 copies by itself and determine the output VAT amount:

VAT 6,000

calculation = ��� = 5,714 dong/copy

price 1 + 5%

The output VAT = 5,714 x 2,000 x 5% = 571,400 dong

Assuming that the input VAT amount is 57,000 dong

Organization B�s payable VAT amount in June shall be 571,400 dong - 57,000 dong - 2,000,000 = - 1,485,600 dong. It means that Organization B shall still not have to pay VAT in this month. From July on, such quantity of books shall be subject to output VAT rather than input VAT. The unit shall have the input VAT that arises but is not yet reimbursed in June (-1,485.600 dong) cleared against the next period�s payable VAT amount when such VAT is declared and calculated.

In cases where Organization B is a unit that pays VAT by the direct method, it shall base itself on added value invoices issued by Publishing House A to account the cost prices of purchased goods to calculate the income amount subject to enterprise income tax.

b2/ Publishing houses that enter into publishing joint venture with business organizations and/or individuals and distribute all joint-venture publications shall declare VAT as for cases where they conduct publishing activities by themselves.

b3/ In cases where publishing houses enter into joint ventures with organizations being public-service units or individuals being authors without business and tax registrations, such publishing houses shall have to calculate and pay the output VAT as prescribed for cases of publishing joint ventures, pay VAT on such individuals� behalf and have VAT deducted according to the rate prescribed by the local tax agency on taxable income.

2. For the units engaged in printing activities

a/ For printing activities (where printing paper�s price is included in the printing unit price):

- The output VAT shall be determined on the basis of VAT calculation price multiplied (x) by VAT rate applicable to printing activities. VAT calculation price of printing activities is the one having not yet included VAT.

b/ For printing activities where printing paper�s price is not included in the printing unit price:

- The output VAT shall be determined on the basis of VAT calculation price multiplied (x) by tax rate. VAT calculation price is the one having not yet included tax and including printing cost, fuels, power and auxiliary materials costs and other expenses (excluding paper cost).

- VAT rate(s) applicable to such activities shall be those prescribed for corresponding printed products.

3. For publication distribution services:

- Cover prices of publications are those having included VAT. So, VAT calculation prices of distributing activities shall be determined according to the following formula:

Cover price - distribution fee

VAT in subsequent process (if any)

calculation = ������������

price 1 + tax rate

- For retail sales of goods valued at less than 100,000 dong each or where customers do not request invoices, the distributing units shall make retail sale lists according to the current regulations.

- For goods consigned for sale: The consigning units shall have to separately account such goods according to ex-warehouse bills of goods consigned to agents for sale (Form No.04/XKDL-8LL issued together with the Finance Ministry�s Circular No.140/1999/TT-BTC of December 2, 1999) to determine input VAT corresponding to output VAT of the sold goods.

B. DEDUCTIBLE INPUT VAT

The deductible input VAT shall be determined according to the following principle:

The deductible input VAT shall be the input VAT amount inscribed on added value invoices of purchased goods and services and 3% on sale invoices of all other kinds of goods purchased from business entities.

For activities of printing publications subject to VAT that use only imported raw material paper of special categories, if printing units can separately account input VAT of such special-category raw material paper, they shall be allowed to declare the whole amount of input tax upon calculating VAT.

Those units having both goods and services subject and not subject to VAT shall have to account input VAT of goods and services subject to VAT in separation from those not subject to VAT, in order to determine deductible input VAT, non-deductible input VAT and payable VAT. In cases where a business unit cannot separately account input VAT, the method of portioning by percentage (%) the turnover subject to VAT on the total turnover in order to determine the deductible input VAT shall be applied.

III. ORGANIZATION OF IMPLEMENTATION

Regarding invoices and vouchers: Units shall issue invoices directly to their customers upon each specific case. If such units pay VAT by the deduction method, they shall issue added value invoices, on which the lines inscribing VAT rate and amount of activities not liable to VAT shall be crossed. If such units pay VAT by the direct method, they shall issue ordinary goods sale invoices.

This Circular takes effect 15 days after its signing. Other contents not guided herein shall still be implemented according to provisions of the Finance Ministry�s Circulars No. 89/1998/TT-BTC of June 27, 1998, No. 175/1998/TT-BTC of December 24, 1998 and No. 106/1999/TT-BTC of August 30, 1999. The already promulgated documents guiding the implementation of VAT which are contrary to this Circular�s guidance are now annulled.

The concerned organizations and individuals are requested to report any problems arising in the course of implementation to the Finance Ministry for study and solution.

For the Finance Minister

Vice Minister
PHAM VAN TRONG